The oversupply was caused by a sudden fall in demand from the hyperscale market.
Worldwide semiconductor revenue totalled USD 418.3 billion in 2019, down 11.9 per cent from the previous calendar year, according to preliminary results by Gartner, Inc. Intel regained the number one position in the market as the downturn in the memory market negatively impacted many of the top vendors, including Samsung Electronics, the top vendor by revenue in 2018 and 2017, the research and advisory firm said.
“The memory market, which accounted for 26.7 per cent of semiconductor sales in 2019, experienced a 31.5 per cent decline in revenue in 2019,” said Gartner (research) vice-president Andrew Norwood said in a statement. Within memory, DRAM revenue declined 37.5 per cent due to an oversupply that started at the end of 2018 and lasted throughout 2019,” he said.
The oversupply was caused by a sudden fall in demand from the hyperscale market. This revealed excessive OEM inventory levels that took the first half of the year to correct. Excessive inventory at DRAM vendors in the second half of 2019 pushed pricing lower and resulted in an average selling price decline of 47.4 per cent in 2019, he said.
Intels semiconductor revenue declined 0.7 per cent in 2019, driven by a slowdown in the server market, an ongoing constrained CPU supply and the 4Q 2019 sale of its cellular modem business to Apple. Samsung dropped to the number two position due to the downturn in the memory market.
Like all memory vendors, the company struggled with oversupply and falling prices in both the DRAM and NAND flash markets. Samsungs memory revenue, which accounted for 82 per cent of its sales, declined 34 per cent in 2019.
Within the memory segment, NAND flash experienced a milder 2019 downturn than the overall memory market, with a revenue decline of 23.1 per cent due to elevated levels of inventory at the end of 2018 that were exacerbated by sluggish demand in the first half of 2019.
The NAND market began to stabilise in July 2019, aided by a power outage in the fabs jointly owned by KIOXIA and Western Digital. This power outage acted as a catalyst to clean out vendor inventories and prompted prices to increase from unsustainable lower levels.
Gartner said the recovery in NAND would continue in 2020 due to low supply bit growth being overwhelmed by strong demand from solid-state drive (SSD) adoption and the ramp-up of 5G smartphones. Revenue growth of other device categories varied between analogue products decline of 5.4 per cent and optoelectronics growth of 2.4 per cent.
Analogue suffered due to weakened equipment markets, especially industrial and legacy automotive, as did other broad-based commodity devices. Optoelectronics recorded the best performance of any device category due to the increasing number of cameras in smartphones.
“In 2020, we expect to see semiconductor market revenue increase after the high inventory clearance to drive up the chip ASP, especially in the memory sector, said Norwood.